Franchise Lawyers: When To Use One

Are you headed towards the finish line? Are you at the point in your franchise business exploration where your yes or no decision on a particular opportunity is imminent? If so, read on…

In my capacity as a franchise ownership advisor, I’ve had several clients hear variations of the following declaration from their franchise development representatives;

“You are welcome to pay to have a franchise attorney look over our Franchise Disclosure Document as well as the franchise agreement, but everything in our agreement is etched in stone.”

In other words: the franchise agreement, (contract) is non-negotiable.

While that may be true, (for the most part) these documents are not that easy to read, especially since a majority of the wording is in legalese. The Franchise Disclosure Document (FDD), combined with the actual franchise agreement itself, can easily be 200-300 pages long. You probably won’t be able to digest all of it in one sitting.

Look at all of the items that are included in every FDD:

·        The Franchisor, its Predecessors, and its Affiliates

·        Business Experience

·        Litigation

·        Bankruptcy

·        Initial Franchise Fee

·        Other Fees

·        Initial Investment

·        Restrictions On Sources Of Products And Services

·        Franchisee’s Obligations

·        Financing

·        Franchisor’s Obligations

·        Territory

·        Trademarks

·        Patents, Copyrights and Proprietary Information

·        Obligation To Participate In The Actual Operation Of The Franchise Business

·        Restrictions On What The Franchisee May Sell

·        Renewal, Termination, Transfer And Dispute Resolution

·        Public Figures

·        Earnings Claims

·        List Of Outlets

·        Financial Statements

·        Contracts

·        Receipt

That’s a lot of information for you to go through, especially if you’re new at reading franchise business documents. That’s why you need to hire a franchise attorney to look the franchise documents over. A franchise attorney knows what to focus on in the FDD and in the actual contract. They’ve probably written a few themselves. They can also lay out exactly what your obligations are going to be to the franchisor.

But, you don’t need to hire a franchise attorney right way. Follow these steps first:

·        Figure out what your top skills are, business-wise

·        Choose a few franchises in which those skills can be utilized

·        Learn all you can about the ones you’ve chosen

·        Do great franchise research

·        Visit* franchise company headquarters

Once you’ve done those things and are pretty much ready to move forward with your chosen franchise opportunity, hire a franchise attorney. A good one will make sure you haven’t missed anything in your research.

As far as I’m concerned, using the services of a qualified franchise attorney is the only thing that should be non-negotiable (in your eyes), if you’re buying a franchise.

One more thing

Are franchise contracts really non-negotiable?

According to Charles Internacola, a New York franchise attorney, they absolutely are:

“It is not illegal for a franchisor to negotiate the terms of your franchise agreement. While you must be reasonable with your expectations about the franchise agreement terms that a franchisor may or may not be willing to negotiate, review the franchise agreement with your franchise lawyer and develop an approach to address and negotiate some strategic points that may enhance your rights as a franchisee.”  

Read about the seven things that Mr. Internacola feels are negotiable in a franchise contract on his New York Franchise Law blog*.

Finally, I don’t want you to get the impression that franchisors are out to get you. They’re not. They just want every franchisee in the system to be on the same page. Doing so can help preserve and even strengthen the brand.

They’re just trying to protect themselves. You’re doing the same thing by hiring a qualified franchise attorney.

*Non-US Government link

About the Author

The Franchise King®, Joel Libava, is the author of the book, Become a Franchise Owner! He's also a franchise ownership advisor; Joel teaches people that are interested in franchise ownership how to properly select and carefully research franchise business opportunities so they can increase their odds of success.